Lok Sabha Approves Key Amendments to Insolvency and Bankruptcy Code

Significant Changes to the Insolvency Framework

On Monday, the Lok Sabha approved the Insolvency and Bankruptcy Code (Amendment) Bill, 2025. Finance Minister Nirmala Sitharaman, who also oversees corporate affairs, emphasized that these amendments are crucial for enhancing the nation’s bankruptcy resolution framework. In her address to Parliament, she highlighted the positive effects of the IBC on resolving distressed assets and improving banking operations.

Since its launch in 2016, the IBC has significantly bolstered the financial stability of banks. Sitharaman pointed out that more than half of the nonperforming loans classified under the IBC have been successfully resolved. Furthermore, companies emerging from the insolvency process have demonstrated improved performance and better corporate governance practices.

The amendment bill introduces 12 essential changes, which were reviewed by a Select Committee that submitted its findings in December 2025 before the parliamentary discussions commenced. A notable feature of this new legislation is the establishment of a stricter timeline for admitting bankruptcy cases; once a default is confirmed, applications must be processed within 14 days of filing. This provision aims to expedite the handling of bankruptcy cases by minimizing court delays associated with ongoing litigations.

Additionally, the bill proposes penalties to prevent misuse of the bankruptcy process. These reforms arrive at a time when the health of India’s banking sector has markedly improved, contrasting with the severe bad loan crisis experienced from 2016 to 2019. The original IBC was introduced to address that crisis by offering a clear, time-bound method for resolving insolvent firms. Over the years, it has emerged as one of the most significant economic reforms of the last decade.

Experts anticipate that these recent amendments will enhance the resolution process by minimizing unnecessary delays and discouraging frivolous lawsuits. Quicker resolutions are expected to enable banks to recover funds more efficiently and allow viable businesses to recover sooner, ultimately benefiting the broader economy. This marks the seventh amendment to the IBC since its inception a decade ago, with the goal of making the process more efficient, accessible, and less prone to abuse, while also fostering the stability of the banking sector and the corporate ecosystem in India.